Problem $6-20$

Refer the table below on the average excess return of the U$.$S$.$ equity market and the standard deviation of that excess return.

Suppose that the U$.$S$.$ market is your risky portfolio.

a$.$ If your risk$-$aversion coefficient is $A=5\mathrm{.}1$ and you believe that the entire $1927-2018$ period is representative of future expected

performance, what fraction of your portfolio should be allocated to T$-$bills and what fraction to equity? Assume your utility function is $U$

$=E(r)-0\mathrm{.}5A{}^2.($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

b$.$ If your risk$-$aversion coefficient is $A=5\mathrm{.}1$ and you believe that the entire $1973-1995$ period is representative of future expected

performance, what fraction of your portfolio should be allocated to T$-$bills and what fraction to equity? $($Do not round intermediate

calculations. Round your answers to $2$ decimal places.$)$